07 Feb 2017

IFA National Dairy Committee Chairman Sean O’Leary said today’s GDT 1.3% price increase had come as a surprise to commentators, but clearly showed that buyers were conscious of the rapidly falling global milk availability. Meanwhile, EU average market returns for dairy products continued steady at high levels.

“Most co-op boards will be meeting this week and next, to examine milk prices payable for January. They must make sure the new increased 5.4% VAT rate benefits the farmers fully, and pass back a fully justified increase of at least 1c/l – more for the lower payers including Kerry – back to support their milk suppliers’ essential income recovery before peak.”

“Today’s GDT auction price increase came despite the slight easing in spots and futures. This is because the global milk production scarcity which has been developing for months is now compounded by the Northern Hemisphere only starting to creep up towards peak, and Oceania’s output slowing down seasonally,” Mr O’Leary said.

“Meanwhile, EU market returns throughout December and January have exceeded 37c/l gross (equivalent to a farm gate price of 32c/l + VAT). Irish SMP prices have caught up with EU averages in January, with butter now even exceeding that figure,” he said.

“As December 2016 figures become available, it is very clear that, other than the US, all dairy regions are seeing production fall. In the EU, France is back an estimated 7%, the UK around 5%, Denmark also 5%, Italy 4.5%, Belgium 12% and Spain 2%. New Zealand production is down 2.75% for December, while Australia’s is back 4.1%. Argentina’s December output is down by a whopping 19%. While December US production recorded a 2.4% increase, global milk availability is continuing to shrink rapidly,” he added.

“Milk price increases continue to be justified, and the National Dairy Committee will continue to lobby board members to deliver fully back to farmers what significantly stronger market returns allow,” he concluded.